Renewable energy firms face increased risk of insolvency

Companies in the renewable energy sector face an increasing risk of insolvency as the impact of government subsidy changes hit solar, wind and tidal energy firms.

According to the insolvency trade body R3, its membership has seen a wave of insolvency activity across the UK from small and medium sized businesses in or supplying the renewable energy sector.

This followed the 65 per cent cut in subsidies to solar support from last December, which coincided with increases in VAT on the installation of solar systems.

Adrian Berry, chairman of R3 in Yorkshire and restructuring partner at Deloitte, said: “It was clear when the government made its latest round of subsidy cuts that there would be casualties within the renewable energy sector, and we are seeing the related insolvency procedures now.”

The scale of the impact is not yet clear but there has already been some consolidation in the renewables sector said Mr Berry.

“The slashes to subsidies effectively made many businesses unviable overnight, with only the best managed and most adaptable outfits proving able to swiftly restructure and reorganise to make the most of a challenging situation,” he added.

Thousands of businesses were started in the last decade to sell, install and maintain green energy installations.

Mr Berry said: “There has been much political criticism of green policy which continues today, but the economic costs in terms of redundancies and business failures, is still unknown.”